Experiments in Technical Analysis

[karthikmarar]

Hi Friends

Next on Trading the MACD ... Zero line Rejects

Finally we will look at what is commonly known as ZERO LINE REJECT or ZLR.
Take a situation when the MACD Line starts converging from top above the Zero line towards the zero line. At times the MACD line reverses and just near the zero line and starts climbing up again. At times the MACD line penetrates the zero line a little and starts reversing. These reversals many times produce excellent trades. These reversals just above the zero line or after just penetrating the zero line are called the Zero line rejects. The situation described above will be Bullish ZLR. A bearish ZLR occurs when the MACD line climbs from the bottom towards the zero line and reverses just below the zero line or after just penetrating it.

Of course one should be quite careful trading the ZLR as it may be a temporary reversal. Working with tight stop losses can produce some excellent trades.

Chart-6 shows some Bullish ZLR.

To be continued

Warm regards

Karthik

 

[kkseal]

Hi Friends,

Requesting your help in decoding the following Metastock code :-

If(LinearReg(C,13)>PREV,If(LinearReg(C,13)-(ATR(13)*2.5)>PREV,
LinearReg(C,13)-(ATR(13)*2.5),PREV),LinearReg(C,13));

It would probably translate to (& is easier to understand in) the following ('broken down') form :-

If  LinearReg(C,13)>PREV
	If    LinearReg(C,13)-(ATR(13)*2.5)>PREV
		LinearReg(C,13)-(ATR(13)*2.5)
	Else  PREV
Else
    LinearReg(C,13)

-------------
'Else' added for clarity
--------------

But still would like to know what exactly it means from people familiar with MS FL.

I am posting it in this thread as it's something i came across in my quest for the ideal Stop Loss level. Came across many others but this seemed the best, most scientific as it takes into account both the scatter (of closing prices) & the (HIGH-LOW intraday) volatility.
It could also satisfy folks (including myself!) who do not like an arbitrary percentage SL.

And sorry for interrupting Karthik.

Regards,
Kalyan.

P.S. : A simpler CLOSE - 2.5*ATR(14) should also work quite well. (Interestingly it tallies quite closely with a 90% Profit Protection trailing stop)

 

[softtouch]

Hi Karthik and Anant,

If you see the graph for Clio Finance,the upward trend started from 5th jan 2007,but Mabiuts Expert is not giving any buy signal for clio finance.....and still it under sell mode.....please find the attached screen shot for more details......let me know.....incase if it's not happening at your end.

Please share the updated Mabiuts Expert System......to verify the things.

Thanks
Softtouch.

 

[alpha1]

^ I dont know about Mabitus etc.
But from a novice trader's view - the graph points that:
1. time has come to sell your stake
2. if you are already holding the stock, then you can take a risk of continuinin hold, but I would not get into a new buy at this stage.

 

[kkseal]

P.S. : A simpler CLOSE - 2.5*ATR(14) should also work quite well. (Interestingly it tallies quite closely with a 90% Profit Protection trailing stop)

Nope not always. Differs with (higher or lower) stock prices . Unsteady volatility also has a bearing.
Morever the profit would obviously depend on the buying price, which would be different for different systems (and it's also likely to be different for even followers of the same system given human nature - some would be hasty, others hesitant etc.)

Regards,
Kalyan.

 

[kkseal]

^ I dont know about Mabitus etc.
But from a novice trader's view - the graph points that:
1. time has come to sell your stake
2. if you are already holding the stock, then you can take a risk of continuinin hold, but I would not get into a new buy at this stage.

Yes the broadening pattern at the top ... the inside-day bar at the end ... the (usually) unsustainable slope of the current rise (also MACD) ... all oscillators at overbought level and dipping ... doesn't look too healthy at least for the short term. A tighter SL is certainly warranted (but not fullproof as such stocks usually have a tendency of gapping down during a fall)

 

[kkseal]

Hi Friends,

Requesting your help in decoding the following Metastock code :-

If(LinearReg(C,13)>PREV,If(LinearReg(C,13)-(ATR(13)*2.5)>PREV,
LinearReg(C,13)-(ATR(13)*2.5),PREV),LinearReg(C,13));

It would probably translate to (& is easier to understand in) the following ('broken down') form :-

If  LinearReg(C,13)>PREV
	If    LinearReg(C,13)-(ATR(13)*2.5)>PREV
		LinearReg(C,13)-(ATR(13)*2.5)
	Else  PREV
Else
    LinearReg(C,13)

-------------
'Else' added for clarity
--------------

PREV presumably refers to the last (previous/preceding) value generated by the function (like LinearReg in line 1) or combination of functions (like LinearReg - ATR in line 2) But not sure.

 

[asnavale]

Hi Karthik and Anant,

If you see the graph for Clio Finance,the upward trend started from 5th jan 2007,but Mabiuts Expert is not giving any buy signal for clio finance.....and still it under sell mode.....please find the attached screen shot for more details......let me know.....incase if it's not happening at your end.

Please share the updated Mabiuts Expert System......to verify the things.

Thanks
Softtouch.

Hi Softtouch,

I don't know which variation of MABIUTS you have used. I am implementing MABIUTS-HB system. According to this system CLIO has given BUY signal on Jan 03, 2007 itself though you have observed the price rise from 5th. Also, it has given a SELL signal today (18-01-2001). If you have already bought it, it is time to SELL it tomorrow.

Please see the attached chart. The BUY on 03-01-07 and SELL on 18-01-07 are clearly shown and are marked with Blue circles.

Regards

-Anant

 

[asnavale]

CONGRATULATIONS KARTHIK​

THIS THREAD STARTED BY YOU
HAS TODAY COMPLETED​

600 MESSAGES​

-Anant

 

[karthikmarar]

Re: Experiments in Technical Analysis - Trading the MACD

Hi friends

We had lot of theorya little boring isnt it? So let us have some fun now time for some practicals.

Now we have some basic tools like Zero line crossovers, MA crossovers, Dips and Hooks. Without complicating further with Histograms we will see how to trade better with these signals.

Trading MACD better combining with other Indicators

Well, we have many signals now. How do we differentiate which are better signals? Trading just with the MACD does not provide much clue. If we combine with some other indicators we may get some more clues.

Combining with ADX provides some good additional clues and we can differentiate which are better signals. I call these signals Power Buys, Power Dips and Power shorts. We will take up some example and define some basic rules, which can be consistently followed.

Later we will take up other combinations like stochastic and CMO.

Meanwhile I would like you too to try out these examples and not just look at charts and say wah. How do we do that? I am enclosing an Afl for Trading the MACD. Please do try it out and check the signals for various charts as we proceed with the discussion.

Please note that I had prepared the Afl as I was writing the discussion on MACD. (I have been doing all these stuff by eyeballing so far ) Also as I am a novice in coding it may be a little primitive. There may be many who would like to enhance it. But I suggest that they wait for some time as a much more elaborate Afl will be on their way soon as we complete our discussion on Trading the MACD

My apologies to the Metastock Guys Just cant imagine doing the coding for these stuff for MA.. even wonder if it is possible.. It would be wonderful if someone can do it..

So let us move on with defining good trading rules and also some good practice

Warm regards

Karthik